WATCH: Financial planning should be taught at school

JOHANNESBURG - A survey conducted among nearly 2 500 South African students has revealed that 91% of respondents would feel more confident about their finances if they were taught about financial planning while at school.

The 2017 PPS Student Confidence Index (SCI) was conducted among students in their fourth year or above, studying at a university or university of technology towards a professional degree, such as engineering, medicine, law or accounting.

According to Nico Coetzee, Executive at PPS Financial Planning, a subsidiary of the PPS Group, the financial services provider focused on graduate professionals, it is not surprising that the majority of South Africa’s future professionals see the benefit of being taught about financial planning while at school.

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“This is probably because these students are now entering into the adult phase of their lives. This means they now have to take responsibility for their personal finances. Most of them can no longer rely on their parents or family members for financial guidance or assistance.”

Most of these students are beginning to search for career opportunities, he added.

“In addition to this, some of them are wanting to own or already own assets, such as a car or property. Many of them will soon begin to receive bills, for example rent and electricity. They also need to start considering insurance to protect their assets and their income. If they do not budget accordingly, they will soon find themselves broke or in debt, as credit is extremely tempting”

With this multitude of financial aspects they are now facing, they are beginning to realise that having some form of financial literacy education at a basic school level would have been beneficial, says Coetzee.

The results of the SCI are mirrored by a recent study conducted by the National Financial Educators Council in the US, which surveyed 5123 young adults between the ages of 18 – 24. The study showed that 50% of the respondents said that a subject on ‘money management/personal finance’ at high school would have benefited their life most.

Internationally, some countries have already integrated some form of financial education into school curriculums, says Coetzee. “In England, for example, it became compulsory for all state schools to include financial education from September 2014 in maths and citizenship lessons*. In addition, The Seattle Times reports that financial literacy is to be included as part of the school curriculum in Washington in the near future.”

South African schools should also start considering including some form of financial literacy education as part of the curriculum, says Coetzee. “This could greatly assist to address the low savings culture in South Africa and ensure a better financial future for all.”

When the respondents were asked whether they feel they understand financial matters such as budgeting, saving, retirement and insurance, only 37% said they have a ‘great understanding’, while close to 10% said ‘not at all’. In addition, 22% said they would like to know more, but they don’t know where to start.

This means that only one third of the respondents feel confident about handling financial matters, says Coetzee. “Some students may be fortunate enough to have been taught about financial planning by their parents. In very unique cases, their parent’s financial planner may be helping them create a financial plan. However, for the majority of these students it is unlikely that they have ever met a financial planner or created a formal financial plan.”

Many students mistakenly believe that they only need to worry about financial matters when they are older and have families, he says. “This is not the case. There are many students that take on a job while they are studying to earn extra money or to pay for their studies. As soon as they begin earning a salary they need to start understanding and implementing all the aspects of financial planning.”

As these young professionals start to manage their own finances, they will be exposed to a variety of financial matters and it can become confusing as to what products they actually need, says Coetzee. “This is where the new-generation of ‘lifestyle financial planners’ comes in. Lifestyle financial planners do not focus on selling products, but rather assisting their clients to achieve their financial goals.”

A lifestyle financial planner can help students navigate through their specific needs to ensure they are covered from a risk perspective and are saving according to what they can afford, he says.

Unfortunately, there is a misperception that getting advice is unaffordable, he says. “However, there are affordable packages for students. It is important to realise that spending a little bit of money in the beginning can actually end up saving them a lot in the long-term, because they will have a proper plan in place.”

“Students must realise that it is not how much they have, but what they do with what they have that can set them on the right track,” he concludes.